E-Z-GO 2013 Annual Report Download - page 68

Download and view the complete annual report

Please find page 68 of the 2013 E-Z-GO annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 102

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102

55 Textron Inc. Annual Report • 2013
Note 3. Accounts Receivable and Finance Receivables
Accounts Receivable
Accounts receivable is composed of the following:
(In millions)
December 28,
2013
December 29,
2012
Commercial $ 654 $ 534
U.S. Government contracts 347 314
1,001 848
Allowance for doubtful accounts (22) (19)
Total $ 979 $ 829
We have unbillable receivables primarily on U.S. Government contracts that arise when the revenues we have appropriately
recognized based on performance cannot be billed yet under terms of the contract. Unbillable receivables within accounts
receivable totaled $163 million at December 28, 2013 and $149 million at December 29, 2012.
Finance Receivables
Finance receivables by classification are presented in the following table.
(In millions)
December 28,
2013
December 29,
2012
Finance receivables held for investment $ 1,483 $ 1,934
Allowance for losses (55) (84)
Total finance receivables held for investment, net 1,428 1,850
Finance receivables held for sale 65 140
Total finance receivables, net $ 1,493 $ 1,990
Finance receivables held for investment primarily includes loans and finance leases provided to purchasers of new and used
Cessna aircraft and Bell helicopters and also includes loans and finance leases secured by used aircraft produced by other
manufacturers. These agreements typically have initial terms ranging from five to ten years and amortization terms ranging from
eight to fifteen years. The average balance of loans and finance leases was $1 million at December 28, 2013. Loans generally
require the customer to pay a significant down payment, along with periodic scheduled principal payments that reduce the
outstanding balance through the term of the loan. Finance leases with no significant residual value at the end of the contractual
term are classified as loans, as their legal and economic substance is more equivalent to a secured borrowing than a finance lease
with a significant residual value. Finance receivables held for investment also includes leveraged leases secured by the ownership
of the leased equipment and real property.
Finance receivables held for sale includes the non-captive loan portfolio at December 28, 2013. These finance receivables are
carried at the lower of cost or fair value and are not included in the credit performance tables below. During 2013, we determined
that we no longer had the intent to hold the remaining non-captive loan portfolio for the foreseeable future and, accordingly,
transferred $34 million of the remaining non-captive loans, net of a $1 million allowance for losses, from the held for investment
classification to the held for sale classification. We received total proceeds of $64 million and $109 million in 2013 and 2012,
respectively, from the sale of finance receivables held for sale and $76 million and $207 million, respectively, from payoffs and
collections.
Our finance receivables are diversified across geographic region and borrower industry. At December 28, 2013, 41% of our
finance receivables were distributed throughout the U.S. compared with 45% at the end of 2012. At December 28, 2013 and
December 29, 2012, finance receivables included $200 million and $341 million, respectively, of receivables that have been
legally sold to a special purpose entity (SPE), which is a consolidated subsidiary of TFC. The assets of the SPE are pledged as
collateral for its debt, which is reflected as securitized on-balance sheet debt in Note 7. Third-party investors have no legal
recourse to TFC beyond the credit enhancement provided by the assets of the SPE.
Credit Quality Indicators and Nonaccrual Finance Receivables
We internally assess the quality of our finance receivables based on a number of key credit quality indicators and statistics such as
delinquency, loan balance to estimated collateral value and the financial strength of individual borrowers and guarantors. Because
many of these indicators are difficult to apply across an entire class of receivables, we evaluate individual loans on a quarterly
basis and classify these loans into three categories based on the key credit quality indicators for the individual loan. These three
categories are performing, watchlist and nonaccrual.